Wednesday, November 12, 2008

I, Broom

The passenger next to me on the plane to Detroit was a business person who was unfortunately subjected to my onslaught of questions (I'm a very curious person who can question a person to death). He is a member of the marketing department for a small business that produces brooms and mops. He was traveling to meet with Wal-Mart representatives, Wal-Mart being his biggest customer. I asked him to discuss two topics which I will succintly describe below.

(1) Somehow we got on the subject of the marvels of capitalism. I mentioned the debate between Hayek versus others regarding the performance of capitalism versus central planning, and told him Hayek largely won the argument for capitalism by arguing the information needed for economic production was dispersed across millions of people, and that information could never be obtained or harness by one organization. To explain, I noted (as economists have been doing since the 50's, see previous post here) that no one person knows how a pencil is made. No planning committee could either.His eyes lighted with enthusiasm, and for the next 20 minutes discussed all the activities and decisions involved with making a broom. Will the broom be made with broomcorn from Mexico or fake broomcorn? Will it be a wooden handle from the U.S. or a metal one from China. There were tons of decisions, and most all of them involved purchasing an input from another currency. I wish I could have recorded it. A broom is so simple, yet producing one efficiently is not.(2) I then asked him to describe the culture at Wal-Mart, him being a supplier of Wal-Mart mops and brooms. He described it as a culture of paranoia. You are filmed from the moment you leave your car at the parking lot. Some of your conversations may be taped. You may not be allowed to carry your cell phone in certain parts of their headquarters. Wal-Mart has a competitive edge and they are scared to death of losing it. I'm so glad I'm in academia.